Exhibit 1.1
UNDERWRITING AGREEMENT
VALLEY MEDIA, INC.
[ ] Shares of Common Stock
Underwriting Agreement
, 1999
X.X. Xxxxxx Securities Inc.
BancBoston Xxxxxxxxx Xxxxxxxx
As Representatives of several underwriters
listed in Schedule I hereto
c/o X.X. Xxxxxx Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Valley Media, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters listed in Schedule I hereto (the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of 3,500,000 shares of Common Stock, $.001 par
value, of the Company (the "Underwritten Shares") and, for the sole purpose of
covering over-allotments in connection with the sale of the Underwritten Shares,
at the option of the Underwriters, certain stockholders of the Company named in
Schedule II hereto ("Selling Stockholders") propose to sell to the Underwriters
up to an additional 525,000 shares of Common Stock of the Company (the "Option
Shares"). The Underwritten Shares and the Option Shares are herein collectively
referred to as the "Shares." The shares of Common Stock of the Company to be
outstanding after giving effect to the sale of the Shares are herein referred to
as the "Stock." The Company is a successor by merger to Valley Media, Inc., a
California corporation (the "Predecessor"), as a result of a reincorporation
transaction that became effective in July 1998 (the "Reincorporation").
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it shall become effective including
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act, is referred to
in this Agreement as the "Registration Statement," and the prospectus in the
form first used to confirm sales of Shares is referred to in this Agreement as
the "Prospectus." If the Company has filed an abbreviated registration
statement pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such
Rule 462 Registration Statement.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Underwritten Shares to the
several Underwriters as hereinafter provided, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective number of Underwritten Shares set forth opposite
such Underwriter's name in Schedule I hereto at a purchase price per share the
("Purchase Price") of $____________.
In addition, each of the Selling Stockholders, as and to the extent
indicated in Schedule II hereto, agrees to issue and sell the Option Shares to
the several Underwriters as hereinafter provided, and the Underwriters on the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, shall have the option to purchase, severally and
not jointly, from the Selling Stockholders up to an aggregate of 525,000 Option
Shares at the Purchase Price, for the sole purpose of covering over-allotments
(if any) in the sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares to be
purchased by each Underwriter shall be the number of Option Shares which bears
the same ratio to the aggregate number of Option Shares being purchased as the
number of Underwritten Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number increased as set forth in Section 9 hereof)
bears to the aggregate number of Underwritten Shares being purchased from the
Company by the several Underwriters, subject, however, to such adjustments to
eliminate any fractional Shares as the Representatives in their sole discretion
shall make. Any such election to purchase Options Shares shall be made in
proportion to the maximum number of Option Shares to be sold by each Selling
Stockholder as set forth in Schedule II hereto.
The Underwriters may exercise the option to purchase the Option Shares at
any time (but not more than once) on or before the thirtieth day following the
date of this Agreement, by written notice from the Representatives to the
Attorney-in-Fact (defined below). Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and the date
and time when the Option Shares are to be delivered and paid for, which may be
the same date and time as the Closing Date (as hereinafter defined) but shall
not be earlier than the Closing Date nor later than the tenth full Business Day
(as hereinafter defined) after the date of such notice (unless such time and
date are postponed in accordance with the provisions of Section 9 hereof). Any
such notice shall be given at least two Business Days prior to the date and time
of delivery specified therein.
2. The Company and the Selling Stockholders understand that the
Underwriters intend (i) to make a public offering of the Shares as soon after
(A) the Registration Statement has become effective and (B) the parties hereto
have executed and delivered this Agreement, as in the judgment of the
Representatives is advisable and (ii) initially to offer the Shares upon the
terms set forth in the Prospectus.
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3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified to the Representatives by the Company
with regard to payment to the Company and by the Attorneys-in-Fact (as defined
below), or any of them, with regard to payment to the Selling Stockholders, in
the case of the Underwritten Shares, on __________________, 1999, or at such
other time on the same or such other date, not later than the fifth Business Day
thereafter, as the Representatives and the Company may agree upon in writing or,
in the case of the Option Shares, on the date and time specified by the
Representatives in the written notice of the Underwriters' election to purchase
such Option Shares. The time and date of such payment for the Underwritten
Shares are referred to herein as the "Closing Date" and the time and date for
such payment for the Option Shares, if other than the Closing Date, are referred
to herein as the "Additional Closing Date." As used herein, the term "Business
Day" means any day other than a day on which banks are permitted or required to
be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company or the Selling
Stockholders, as the case may be. The certificates for the Shares will be made
available for inspection and packaging by the Representatives at the office of
X.X. Xxxxxx Securities Inc. set forth above not later than 1:00 P.M., New York
City time, on the Business Day prior to the Closing Date or the Additional
Closing Date, as the case may be.
4. (A) The Company represents and warrants to each Underwriter and the
Selling Stockholders that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary prospectus
filed as part of the Registration Statement as originally filed or as part of
any amendment thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act, and did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided that this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Company, threatened by the
Commission; and the Registration Statement and Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) comply, or will comply, as the case may be, in all material respects
with the Securities Act and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto and as of the
date of the Prospectus and any
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amendment or supplement thereto, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Prospectus,
as amended or supplemented, if applicable, at the Closing Date or Additional
Closing Date, as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; except that the foregoing representations and warranties
shall not apply to statements or omissions in the Registration Statement or
the Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein;
(c) the financial statements, and the related notes thereto,
included in the Registration Statement and the Prospectus present fairly the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates indicated and the results of their operations and changes in
their consolidated cash flows for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and the supporting schedules included
in the Registration Statement present fairly the information required to be
stated therein; and the pro forma financial information, and the related notes
thereto, included in the Registration Statement and the Prospectus have been
prepared in accordance with the applicable requirements of the Securities Act
and are based upon good faith estimates and assumptions believed by the Company
to be reasonable;
(d) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (i) there has not been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries, or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
business, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, otherwise than
as set forth or contemplated in the Prospectus; and (ii) except as set forth or
generally described in the Prospectus neither the Company nor any of its
subsidiaries has entered into any transaction or agreement material to the
Company and its subsidiaries taken as a whole;
(e) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of Kentucky, Maine, Massachusetts, Minnesota,
New Jersey, New York and Pennsylvania, the only jurisdictions in which it owns
or leases properties, or conducts any business, so as to require such
qualification;
(f) the Company has only one subsidiary which has been duly
incorporated and is validly existing as a corporation under the laws of its
jurisdiction of incorporation, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification,
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other than where the failure to be so qualified or in good standing would not
have a material adverse effect on the Company and its subsidiaries taken as a
whole; all the outstanding shares of capital stock of such subsidiary of the
Company have been duly authorized and validly issued, are fully-paid and
non-assessable, and (except, in the case of foreign subsidiaries, for
directors' qualifying shares) are owned by the Company, directly or
indirectly, free and clear of all liens, encumbrances, security interests and
claims;
(g) this Agreement has been duly authorized, executed and
delivered by the Company;
(h) the Company has an authorized capitalization as set forth in
the Prospectus and such authorized capital stock conforms as to legal matters to
the description thereof set forth in the Prospectus, and all of the outstanding
shares of capital stock of the Company (including the Shares to be sold by the
Selling Stockholders) have been duly authorized and validly issued, are
fully-paid and non-assessable and are not subject to any preemptive or similar
rights; and, except as described in or expressly contemplated by the Prospectus,
there are no outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the
Company or any of its subsidiaries, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any capital
stock of the Company or any of its subsidiaries, any such convertible or
exchangeable securities or any such rights, warrants or options;
(i) the Shares to be issued and sold by the Company hereunder
have been duly authorized, and, when issued and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be duly issued
and will be fully paid and non-assessable and will conform to the descriptions
thereof in the Prospectus; and the issuance of the Shares is not subject to any
preemptive or similar rights;
(j) neither the Company nor any of its subsidiaries is, or with
the giving of notice or lapse of time or both would be, in violation of or in
default under, its Certificate of Incorporation or By-Laws or any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or any of
them or any of their respective properties is bound, except for violations and
defaults which individually and in the aggregate are not material to the Company
and its subsidiaries taken as a whole; the issue and sale of the Shares and the
performance by the Company of its obligations under this Agreement and the
consummation of the transactions contemplated herein will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is the subject, nor
will any such action result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company or any applicable law
or statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company, its subsidiaries or any of their
respective properties; and no consent, approval, authorization, order, license,
registration or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Shares or the
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consummation by the Company of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations, orders, licenses,
registrations or qualifications as have been obtained under the Securities
Act and as may be required under state securities or Blue Sky Laws in
connection with the purchase and distribution of the Shares by the
Underwriters;
(k) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries or any of their respective properties or to
which the Company or any of its subsidiaries is or may be a party or to which
any property of the Company or any of its subsidiaries is or may be the subject
which, if determined adversely to the Company or any of its subsidiaries, could
individually or in the aggregate have, or reasonably be expected to have, a
material adverse effect on the general affairs, business, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, and, to the best knowledge of the Company, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others; and there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement that are not
described or filed as required;
(l) the Company and its subsidiaries have good and marketable
title in fee simple to all items of real property and good and marketable title
to all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described or referred to in
the Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made or proposed to be made of such property
by the Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under valid,
existing and enforceable leases with such exceptions as are not material and do
not interfere with the use made or proposed to be made of such property and
buildings by the Company or its subsidiaries;
(m) no relationship, direct or indirect, exists between or among
the Company or any or its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which is required by the Securities Act to be
described in the Registration Statement and the Prospectus which is not so
described;
(n) no person has the right to require the Company to register
any securities for offering and sale under the Securities Act by reason of the
filing of the Registration Statement with the Commission or the issue and sale
of the Shares to be sold by the Company hereunder or, to the knowledge of the
Company, the sale of the Shares to be sold by the Selling Stockholders
hereunder;
(o) the Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
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(p) the Company has complied, and prior to the Reincorporation
the Predecessor had complied, with all provisions of Section 517.075, Florida
Statutes (Chapter 92-198, Laws of Florida) relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba;
(q) Deloitte & Touche LLP who have certified certain financial
statements of the Company and its subsidiaries are independent public
accountants with respect to the Company and its subsidiaries as required by the
Securities Act;
(r) the Company and its subsidiaries have, and prior to the
Reincorporation the Predecessor and its subsidiaries had, filed all federal,
state, local and foreign tax returns which have been required to be filed and
have paid all taxes shown thereon and all assessments received by them or any of
them to the extent that such taxes have become due and are not being contested
in good faith; and, except as disclosed in the Registration Statement and the
Prospectus, there is no tax deficiency which has been or might reasonably be
expected to be asserted or threatened against the Company, the Predecessor or
any subsidiary;
(s) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock;
(t) each of the Company and its subsidiaries owns, possesses or
has obtained all licenses, permits, certificates, consents, orders, approvals
and other authorizations (collectively "Permits") from, and has made all
declarations and filings with, all federal, state, local and other governmental
authorities (including foreign regulatory agencies), all self-regulatory
organizations and all courts and other tribunals, domestic or foreign, necessary
to own or lease, as the case may be, and to operate its properties and to carry
on its business as conducted as of the date hereof, and neither the Company nor
any such subsidiary has received any actual notice of any proceeding relating to
revocation or modification of any such Permits, except as described in the
Registration Statement and the Prospectus or where the failure to own, possess
or have obtained such Permits, or where the revocation of such Permits, would
not, individually or in the aggregate, have a material adverse effect on the
Company and its subsidiaries taken as a whole; and each of the Company and its
subsidiaries is in compliance with all laws and regulations relating to the
conduct of its business as conducted as of the date hereof except where the
failure to be in compliance with such laws and regulations would not,
individually or in the aggregate, have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(u) there are no existing or, to the best knowledge of the
Company, threatened labor disputes with the employees of the Company or any of
its subsidiaries which are likely to have a material adverse effect on the
Company and its subsidiaries taken as a whole;
(v) the Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
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respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(w) in the ordinary course of its business, the Company conducts
a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such reviews, the
Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(x) each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA") that is maintained, administered or contributed to by the Company or
any of its affiliates for employees or former employees of the Company and its
affiliates has been maintained in compliance with its terms and the requirements
of any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended, ("Code").
No prohibited transaction, within the meaning of Section 406 of ERISA or Section
4975 of the Code has occurred with respect to any such plan excluding
transactions effected pursuant to a statutory or administrative exemption. For
each such plan which is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA no "accumulated funding deficiency" as defined in
Section 412 of the Code has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeds the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions;
(y) except as described in the Registration Statement and
Prospectus, the Company and its subsidiaries have sufficient trademarks, trade
names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their businesses as now conducted; the expiration of
any trademarks, trade names, patent rights, copyrights, licenses, approvals or
governmental authorizations would not have a material adverse effect on the
general affairs, business, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries taken as a whole;
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the Company has no knowledge of any infringement by the Company or its
subsidiaries of trademarks, trade name rights, patent rights, copyrights,
licenses, trade secrets or other similar rights of others which could have a
material adverse effect on the general affairs, business, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries taken as a whole; and no claims have been made
or are threatened against the Company or its subsidiaries regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement which could have a material adverse effect on the general
affairs, business, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a whole;
(z) the merger of the Predecessor with and into the Company has
been consummated in compliance with applicable law; the Company has succeeded to
all of the rights, privileges, powers and franchises, and is subject to all of
the restrictions, disabilities and duties, of the Predecessor; the Company has
succeeded to all of the material contract rights of the Predecessor, and all
required consents with respect to such contracts have been obtained except where
the failure to obtain such contract rights or consents would not, individually
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries take as a whole; all of the outstanding shares of capital stock of
the Predecessor have been converted into shares of capital stock of the Company
having the rights, preferences and privileges described in the Registration
Statement and Prospectus; all of the outstanding options of the Predecessor are
exercisable for shares of Common Stock of the Company as described in the
Registration Statement and Prospectus; the Reincorporation was duly authorized
by the Board of Directors and shareholders of the Predecessor and the Board of
Directors and stockholders of the Company; the consummation of the
Reincorporation does not and will not conflict with, or result in any breach of,
or constitute a default under (nor constitute any event which with notice, lapse
of time or both would constitute a breach of or default under), any provision of
any material license, indenture, lease, mortgage, deed of trust, bank loan or
credit agreement or other agreement or instrument to which the Company is, or
immediately prior to the Reincorporation the Predecessor was, a party or by
which the Company or its properties are, or immediately prior to the
Reincorporation the Predecessor or its properties were, bound or affected; the
consummation of the Reincorporation does not and will not conflict with, or
result in a violation of, any federal, state, local or foreign law, regulation
or rules or any decree, judgment or order applicable to the Company, or
immediately prior to the Reincorporation, the Predecessor, the result of which
could have a material adverse effect on the general affairs, business,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries taken as a whole; and the issuance of capital
stock by the Company in the Reincorporation was in compliance with all
applicable state securities or Blue Sky Laws and was exempt from registration
under the Securities Act;
(aa) except as disclosed in the Registration Statement and
Prospectus, to the knowledge of the Company and its subsidiaries, no customer
which accounted for more the 10% of the Company's net sales during the
nine-month period ended December 31, 1998 has notified the Company of its
intention to cease dealing with the Company or otherwise materially reduce the
volume of business transacted by such customer with the Company below historical
levels; and
(bb) except as disclosed in the Registration Statement and
Prospectus, to the knowledge of the Company and its subsidiaries, no supplier
which accounted for more than 10% of the Company's net sales during the
nine-month period ended December 31, 1998 has notified the Company of its
intention to cease dealing with the Company or otherwise materially reduce the
volume of business transacted by such supplier with the Company below historical
levels.
4. (B) Each of the Selling Stockholders severally represents and
warrants to, and agrees with, each of the Underwriters that:
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(a) all consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this Agreement and
the Power of Attorney (the "Power of Attorney") and the Custody Agreement (the
"Custody Agreement") hereinafter referred to, and for the sale and delivery of
the Shares to be sold by such Selling Stockholder hereunder, have been obtained;
and such Selling Stockholder has full right, power and authority to enter into
this Agreement, the Power of Attorney and the Custody Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such Selling Stockholder
hereunder; this Agreement, the Power of Attorney and the Custody Agreement have
each been duly authorized, executed and delivered by such Selling Stockholder;
(b) the sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder with all of
the provisions of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any statute, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(c) such Selling Stockholder has good and valid title to the
Shares to be sold at the Additional Closing Date by such Selling Stockholder,
free and clear of all liens, encumbrances, equities or adverse claims; such
Selling Stockholder will have, immediately prior to the Additional Closing Date
good and valid title to the Shares to be sold at the Additional Closing Date by
such Selling Stockholder, free and clear of all liens, encumbrances, equities or
adverse claims; and, upon delivery of the certificates representing such Shares
and payment therefor pursuant hereto, good and valid title to such Shares, free
and clear of all liens, encumbrances, equities or adverse claims, will pass to
the several Underwriters;
(d) such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares;
(e) each Selling Stockholder has signed a "lock-up" agreement in
substantially the form of Exhibit A hereto on or before the date hereof; and
(f) the Registration Statement and the Prospectus (as amended or
supplemented) comply or will comply, as the case may be, in all material
respects the Securities Act and do not and will not, as of the applicable
effective date of the Registration Statement and any amendment thereto and as of
the date of the Prospectus and any amendment or supplement thereto, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented, if applicable, at the Closing
Date or Additional Closing Date, as the case may be, will not contain any untrue
statement of a material fact or omit
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to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; except that
the foregoing representations and warranties shall not apply to statements or
omissions in the Registration Statement or the Prospectus made in reliance
upon and in conformity with information relating to any Underwriter furnished
to the Company in writing by such Underwriter through the Representatives
expressly for use therein.
Each of the Selling Stockholders represents and warrants that
certificates in negotiable form representing all of the Shares to be sold by
such Selling Stockholders hereunder have been placed in custody under a Custody
Agreement relating to such Shares, in the form heretofore furnished to you, duly
executed and delivered by such Selling Stockholder to Norwest Bank, as custodian
(the "Custodian"), and that such Selling Stockholder has duly executed and
delivered Powers of Attorney, in the form heretofore furnished to you,
appointing the person or persons indicated in Schedule II hereto, and each of
them, as such Selling Stockholder's Attorneys-in-fact (the "Attorneys-in-Fact"
or any one of them the "Attorney-in Fact") with authority to execute and deliver
this Agreement on behalf of such Selling Stockholder, to determine the purchase
price to be paid by the Underwriters to the Selling Stockholders as provided
herein, to authorize the delivery of the Shares to be sold by such Selling
Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder
in connection with the transactions contemplated by this Agreement and the
Custody Agreement.
Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling Stockholder
under the Custody Agreement, are subject to the interests of the Underwriters
hereunder, and that the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable. Each
of the Selling Stockholders specifically agrees that the obligations of such
Selling Stockholder hereunder shall not be terminated by operation of law,
whether by the death or incapacity of any individual Selling Stockholder, or, in
the case of an estate or trust, by the death or incapacity of any executor or
trustee or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event. If any individual Selling
Stockholder or any such executor or trustee should die or become incapacitated,
or if any such estate or trust should be terminated, or if any such partnership
or corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing such
Shares shall be delivered by or on behalf of such Selling Stockholder in
accordance with the terms and conditions of this Agreement and the Custody
Agreement, and actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or not the
Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of
such death, incapacity, termination, dissolution or other event.
5. (A) The Company covenants and agrees with each of the several
Underwriters as follows:
(a) to use its best efforts to cause the Registration Statement to
become effective at the earliest possible time and, if required, to file the
final Prospectus with the
11
Commission within the time periods specified by Rule 424(b) and Rule 430A
under the Securities Act and to furnish copies of the Prospectus to the
Underwriters in New York City prior to 10:00 a.m., New York City time, on the
second Business Day next succeeding the date of this Agreement in such
quantities as the Representatives may reasonably request;
(b) to deliver, at the expense of the Company, to the Representatives
three (3) signed copies of the Registration Statement (as originally filed) and
each amendment thereto, in each case including exhibits, and to each other
Underwriter a conformed copy of the Registration Statement (as originally filed)
and each amendment thereto, in each case without exhibits and, during the period
mentioned in paragraph (e) below, to each of the Underwriters as many copies of
the Prospectus (including all amendments and supplements thereto) as the
Representatives may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the Registration
Statement becomes effective, to furnish to the Representatives a copy of the
proposed amendment or supplement for review and not to file any such proposed
amendment or supplement to which the Representatives reasonably object;
(d) to advise the Representatives promptly, and to confirm such
advice in writing (i) when the Registration Statement has become effective, (ii)
when any amendment to the Registration Statement has been filed or becomes
effective, (iii) when any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish the Representatives with copies thereof, (iv) of
any request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for any additional information,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose, (vi) of the
occurrence of any event, within the period referenced in paragraph (e) below, as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
and (vii) of the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and to use its best efforts to prevent the issuance of any such stop
order, or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any order suspending any such qualification
of the Shares, or notification of any such order thereof and, if issued, to
obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered in
connection with sales by the Underwriters or any dealer, any event shall occur
as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at the expense of the Company,
12
to the Underwriters and to the dealers (whose names and addresses the
Representatives will furnish to the Company) to which Shares may have been
sold by the Representatives on behalf of the Underwriters and to any other
dealers upon request, such amendments or supplements to the Prospectus as may
be necessary so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the Prospectus
is delivered to a purchaser, be misleading or so that the Prospectus will
comply with law;
(f) to endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall
reasonably request and to continue such qualification in effect so long as
reasonably required for distribution of the Shares; PROVIDED that the Company
shall not be required to file a general consent to service of process in any
jurisdiction;
(g) to make generally available to its security holders and to the
Representatives as soon as practicable an earnings statement covering a period
of at least twelve months beginning with the first fiscal quarter of the Company
occurring after the effective date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder;
(h) for a period of five years after the Closing Date, to furnish to
the Representatives copies of all reports or other communications (financial or
other) furnished to holders of the Shares, and copies of any reports and
financial statements furnished to or filed with the Commission or any national
securities exchange;
(i) for a period of 180 days after the date of the initial public
offering of the Shares not to (i) offer, pledge, announce the intention to sell,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any shares of Stock or
any securities convertible into or exercisable or exchangeable for Stock or (ii)
enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of the Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Stock or such other securities, in cash or otherwise without the prior
written consent of X.X. Xxxxxx Securities Inc. on behalf of the Underwriters,
other than the Shares to be sold hereunder, any shares of Stock of the Company
issued upon the exercise of options outstanding as of the date hereof and
additional options granted under the Company's 1994 Stock Option Plan and 1997
Stock Option Plan, any shares of Stock of the Company issued pursuant to
distributions from the Company's Employee Stock Ownership Plan, options to
purchase shares of Stock or debt convertible into shares of Stock issued in
connection with the Company acquiring the stock or assets of a business;
(j) to use the net proceeds received by the Company from the sale of
the Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(k) to use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National Market
(the "Nasdaq National Market");
13
(l) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of its obligations hereunder,
including without limiting the generality of the foregoing, all costs and
expenses (i) incident to the preparation, issuance, execution and delivery of
the Shares, (ii) incident to the preparation, printing and filing under the
Securities Act of the Registration Statement, the Prospectus and any preliminary
prospectus (including in each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the registration or qualification of
the Shares under the laws of such jurisdictions as the Representatives may
designate (including fees of counsel for the Underwriters and its
disbursements), (iv) in connection with the listing of the Shares on the Nasdaq
National Market, (v) related to the filing with, and clearance of the offering
by, the National Association of Securities Dealers, Inc., (vi) in connection
with the printing (including word processing and duplication costs) and delivery
of this Agreement, the Preliminary and Supplemental Blue Sky Memoranda and the
furnishing to the Underwriters and dealers of copies of the Registration
Statement and the Prospectus, including mailing and shipping, as herein
provided, (vii) any expenses incurred by the Company in connection with a "road
show" presentation to potential investors, (viii) the cost of preparing stock
certificates and (ix) the cost and charges of any transfer agent and any
registrar.
5. (B) Each of the Selling Stockholders covenants and agrees with each
of the several Underwriters to deliver to the Representatives prior to or at the
Closing Date a properly completed and executed United States Treasury Department
Form W-9 (or other applicable form or statement specified by the Treasury
Department regulations in lieu thereof) in order to facilitate the Underwriters'
documentation of their compliance with the reporting and withholding provisions
of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the
transactions herein contemplated.
6. The several obligations of the Underwriters hereunder to purchase the
Shares on the Closing Date or the Additional Closing Date, as the case may be,
are subject to the performance by the Company of its obligations hereunder and
to the following additional conditions:
(a) the Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed under the Securities Act, such
post-effective amendment shall have become effective) not later than 5:00 P.M.,
New York City time, on the date hereof; and no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
shall be in effect, and no proceedings for such purpose shall be pending before
or threatened by the Commission; the Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Securities Act and in
accordance with Section 5(a) hereof; and all requests from the Commission or
other regulatory authorities for additional information shall have been complied
with to the satisfaction of the Representatives;
(b) the representations and warranties of the Company and the Selling
Stockholders contained herein are true and correct on and as of the Closing Date
or the Additional Closing Date, as the case may be, as if made on and as of the
Closing Date or the Additional Closing Date, as the case may be, and each of the
Company and the Selling
14
Stockholders shall have complied with all agreements and all conditions on
its part to be performed or satisfied hereunder at or prior to the Closing
Date or the Additional Closing Date, as the case may be;
(c) since the respective dates as of which information is given in
the Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the general affairs, business, prospects, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, other than as set forth or contemplated in the
Prospectus, the effect of which in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares on the Closing Date or the Additional Closing Date, as the case
may be, on the terms and in the manner contemplated in the Prospectus; and
neither the Company nor any of its subsidiaries has sustained since the date of
the latest audited financial statements included in the Prospectus any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(d) the Representatives shall have received on and as of the Closing
Date or the Additional Closing Date, as the case may be, (1) a certificate of an
executive officer of the Company, with specific knowledge about the Company's
financial matters, in his capacity as such, satisfactory to the Representatives
to the effect set forth in subsections (a) through (c) (with respect to the
respective representations, warranties, agreements and conditions of the
Company) of this Section and to the further effect that there has not occurred
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, business, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole from that set forth or contemplated in the
Registration Statement and (2) a certificate of the Selling Stockholders,
satisfactory to the Representatives to the effect set forth in subsection (b) of
this Section 6 (with respect to the respective representations, warranties,
agreements and conditions of the Selling Stockholders);
(e) Howard, Rice, Nemerovski, Canady, Xxxx & Rabkin, a
Professional Corporation, counsel for the Company, shall have furnished to
the Representatives their written opinion, dated the Closing Date or the
Additional Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction
of incorporation, with requisite corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of Kentucky, Maine, Massachusetts, Minnesota, New Jersey, New York and
Pennsylvania;
15
(iii) to our knowledge, the Company has only one subsidiary
incorporated under the laws of Bermuda; all of the outstanding shares of
capital stock of such subsidiary are owned of record by the Company, and to
counsel's knowledge are free and clear of all liens, encumbrances, equities
or claims;
(iv) other than as set forth or contemplated in the Prospectus,
to our knowledge, there are no legal or governmental investigations, actions,
suits or proceedings pending or threatened against the Company or any of its
subsidiaries or any of their respective properties or to which the Company or
any of its subsidiaries is or may be a party or to which any property of the
Company or its subsidiaries is or may be the subject which, if determined
adversely to the Company or any of its subsidiaries, could individually or in
the aggregate, reasonably be expected to have, a material adverse effect on
the general affairs, business, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries taken as
a whole;
(v) such counsel does not know of any contracts or other
documents that are required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement that are
not described therein or filed as exhibits thereto;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the Prospectus;
(viii) the shares of capital stock of the Company outstanding
prior to the issuance of the Shares to be sold by the Company have been duly
authorized and are validly issued, fully paid and non-assessable;
(ix) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when delivered to and paid for by
the Underwriters in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable and the issuance of the Shares
is not subject to any preemptive or similar rights under the Company's
Certificate of Incorporation, Bylaws or any agreement known to such counsel;
(x) the statements in the Prospectus under "Risk Factors -
We May Have Insufficient Access to Funds if We Fail to Comply with the Terms
of Our Credit," "Risk Factors - Insiders Could Preclude Actions Desired by
the Remaining Stockholders," "Risk Factors - The Significant Number of Shares
of Common Stock Eligible for Future Sale Could Adversely Affect the Price of
Our Stock," the eleventh and twelfth paragraphs of "Management's Discussion
and Analysis of Financial Condition and Results of Operation - Liquidity and
Capital Resources," "Business - Facilities," "Management - Compensation
Plans," "Management - Limitation of Liability and Indemnification Matters,"
"Certain Transactions," "Description of Capital Stock," "Shares Eligible for
Future Sale" and the fourth, fifth, sixth and eighth paragraphs of
"Underwriting", and in the Registration Statement in Items 14 and 15, insofar
as such statements constitute a summary of the terms of the Stock, legal
matters,
16
documents or proceedings referred to therein, fairly present the information
called for with respect to such terms, legal matters, documents or
proceedings;
(xi) such counsel is of the opinion that the Registration
Statement and the Prospectus and any amendments and supplements thereto
(other than the financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Securities Act and rules promulgated
thereunder by the Commission;
(xii) the Company is not, and with the giving of notice or
lapse of time or both would not be, in violation of or in default under, its
Certificate of Incorporation or Bylaws, except for violations and defaults
which individually and in the aggregate are not material to the Company and
its subsidiaries taken as a whole; the issue and sale of the Shares being
delivered on the Closing Date or the Additional Closing Date, as the case may
be, and the performance by the Company of its obligations under this
Agreement and the consummation of the transactions contemplated herein in
accordance with the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under, any agreement or
instrument set forth in Exhibit A to the opinion, nor will any such action
result in any violation of the provisions of the Certificate of Incorporation
or the Bylaws of the Company or any applicable federal, California or
Delaware corporate law, rule or statute or any order of any court or
governmental agency or body in which the Company is a named party;
(xiii) no consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental agency or
body is required for the Company's issuance and sale of the Firm Shares or
the consummation of the other transactions contemplated by this Agreement,
except such consents, approvals, authorizations, orders, licenses,
registrations or qualifications as have been obtained under the Securities
Act and as may be required under state securities laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(xiv) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
entity "controlled" by an "investment company", as such terms are defined in
the Investment Company Act;
(xv) the merger of Valley Media Inc, a California
corporation (the "Predecessor"), with and into the Company (the
"Reincorporation") has been consummated in compliance with applicable law;
the Company has succeeded to all of the rights, privileges, powers and
franchises, and is subject to all of the restrictions, disabilities and
duties of the Predecessor as provided under Section 259 of the Delaware
General Corporation Law; and the issuance of capital stock by the Company in
the Reincorporation was in compliance with the laws of the State of
California and the General Corporation Law of Delaware and was exempt from
registration under the Securities Act.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of California and Delaware, to the extent such counsel deems proper
and to the extent specified in such opinion, if
17
at all, upon an opinion or opinions (in form and substance reasonably
satisfactory to Underwriters' counsel) of other counsel reasonably acceptable
to the Underwriters' counsel, familiar with the applicable laws; (B) as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and certificates or other written
statements of officials of jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company. The
opinion of such counsel for the Company shall state that the opinion of any
such other counsel upon which they relied is in form satisfactory to such
counsel and, in such counsel's opinion, the Underwriters and they are
justified in relying thereon.
The opinion of Howard, Rice, Nemerovski, Canady, Xxxx & Xxxxxx, a
Professional Corporation, described above shall be rendered to the Underwriters
at the request of the Company and shall so state therein.
(f) Howard, Rice, Hemerovski, Xxxxxx, Xxxx & Xxxxxx, a Professional
Corporation, counsel for the Selling Stockholders, shall have furnished to the
Representatives their written opinion, dated the Closing Date or Additional
Closing Date, as the case may be, in form and substance satisfactory to the
Representatives, to the effect that:
(i) this Agreement has been duly executed and delivered by
or on behalf of each of the Selling Stockholders;
(ii) a Power of Attorney and a Custody Agreement have been
duly authorized, executed and delivered by each Selling Stockholder and
constitute valid and binding agreements of each Selling Stockholder in
accordance with their terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium, or other
similar laws or court decisions relating to or affecting the rights of
creditors generally;
(iii) each Selling Stockholder is the record owner of all of
the Shares to be sold by such Selling Stockholder; upon payment for and
delivery of the Option Shares in accordance with this Agreement, assuming the
Underwriters are acquiring the Option Shares in good faith without notice of
any adverse claim, the Underwriters will acquire the Option Shares free and
clear of any adverse claim; and
(iv) the sale of the Shares and the execution and delivery by
each the Selling Stockholder of, and the performance by each Selling
Stockholder of his obligations under, this Agreement, and the consummation of
the transactions contemplated herein, will not (i) conflict with or result in
a breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument set forth in Exhibit B, or (ii) result in any
violation of any applicable law or statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over either
of the Selling Stockholders; and
(v) no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the sale by the Selling Stockholders of the
Option Shares or the consummation by the Selling Stockholders of the
transactions contemplated by this Agreement, except such consents,
18
approvals, authorizations, registrations or qualifications as have been
obtained under the Securities Act and as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution
of the Shares by the Underwriters.
In rendering such opinions, such counsel may rely as to matters
involving the application of laws other than the laws of the United States and
the States of California and Delaware, to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel reasonably acceptable to the Underwriters' counsel,
familiar with the applicable laws. The opinion of such counsel for the Selling
Stockholders shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in such counsel's opinion, the Underwriters
and they are justified in relying thereon.
(g) on the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment to the
Registration Statement and also on the Closing Date or Additional Closing Date,
as the case may be, Deloitte & Touche LLP shall have furnished to you letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you, containing statements and information of the type
customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus;
(h) the Representatives shall have received on and as of the Closing
Date or Additional Closing Date, as the case may be, an opinion of Xxxxxx
Godward LLP, counsel to the Underwriters, with respect to the due authorization
and valid issuance of the Shares, the Registration Statement, the Prospectus and
other related matters as the Representatives may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(i) the Shares to be delivered on the Closing Date or Additional
Closing Date, as the case may be, shall have been approved for listing on the
Nasdaq National Market;
(j) on or prior to the Closing Date or Additional Closing Date, as
the case may be, the Company shall have furnished to the Representatives such
further certificates and documents as the Representatives shall reasonably
request;
(k) the "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and the Selling Stockholders, certain other
stockholders, officers and directors of the Company relating to sales and
certain other dispositions of shares of Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force and effect
on the Closing Date or Additional Closing Date, as the case may be.
7. The Company agrees to indemnify and hold harmless each Underwriter,
each affiliate of any Underwriter which assists such Underwriter in the
distribution of the Shares and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934, as amended ("the Exchange Act"), from and
against any and all losses, claims, damages and liabilities (including, without
limitation, the legal fees and other expenses incurred in connection with any
suit, action or proceeding or any claim asserted) caused by any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except (i) insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein or (ii) if
copies of the Prospectus were timely delivered to the Underwriter pursuant to
Section 5(a) and a copy of the Prospectus (as then amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, or liability.
Each of the Selling Stockholders severally in proportion to the number of
Shares actually sold by such Selling Stockholder to the total number of Shares
actually sold hereunder agrees to indemnify and hold harmless each Underwriter,
each affiliate of any Underwriter which assists such Underwriter in the
distribution of the Shares and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, the legal fees and other expenses
incurred in connection with any suit, action or
19
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except (i) insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in
writing by such Underwriter through the Representatives expressly for use
therein or (ii) if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 5(a) and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, or liability.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act and each of the
Selling Stockholders to the same extent as the foregoing indemnity from the
Company and the Selling Stockholders to each Underwriter, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through the Representatives expressly for use in
the Registration Statement, the Prospectus, any amendment or supplement thereto,
or any preliminary prospectus. The Company and the Underwriters acknowledge
that the information set forth in the first, third, seventh and ninth paragraphs
under "Underwriting" in the Registration Statement and Prospectus
20
(insofar as such information relates to the Underwriters) constitutes the
only information furnished by the Underwriters to the Company for inclusion
in the Registration Statement and Prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the three
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, may assume the defense thereof and in such case shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Underwriters, each affiliate of any Underwriter which
assists such Underwriter in the distribution of the Shares and such control
persons of Underwriters shall be designated in writing by X.X. Xxxxxx Securities
Inc. and any such separate firm for the Company, its directors, its officers who
sign the Registration Statement and such control persons of the Company shall be
designated in writing by the Company and any such separate firm for the Selling
Stockholders shall be designated in writing by Barnet X. Xxxxx. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the Indemnifying Person agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
21
If the indemnification provided for in the first, second and third
paragraphs of this Section 7 is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Selling Stockholders on the one hand and the Underwriters on
the other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other hand
shall be deemed to be in the same respective proportions as the net proceeds
from the offering (before deducting expenses) received by the Company and the
Selling Stockholders and the total underwriting discounts and the commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate public offering price of the
Shares. The relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by PRO RATA allocation (even if the Selling Stockholders or the
Underwriters were treated as one entity for such purposes) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall an Underwriter be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7 are several in proportion to the respective number of Shares set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
22
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company and the Selling Stockholders
set forth in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Company, its officers or directors or any other person
controlling the Company or the Selling Stockholders and (iii) acceptance of and
payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Option Shares)
may be terminated in the absolute discretion of the Representatives, by
notice given to the Company and the Selling Stockholders, if after the
execution and delivery of this Agreement and prior to the Closing Date (or,
in the case of the Option Shares, prior to the Additional Closing Date) (i)
trading generally shall have been suspended or materially limited on or by,
as the case may be, any of the New York Stock Exchange or the American Stock
Exchange, the Nasdaq Stock Market, the Chicago Board Options Exchange, the
Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of
any securities of or guaranteed by the Company shall have been suspended on
any exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities, or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or
any calamity or crisis that, in the judgment of the Representatives, is
material and adverse and which, in the judgment of the Representatives, makes
it impracticable to market the Shares being delivered at the Closing Date or
the Additional Closing Date, as the case may be, on the terms and in the
manner contemplated in the Prospectus.
9. This Agreement shall become effective upon the later of (x) execution
and delivery hereof by the parties hereto and (y) release of notification of the
effectiveness of the Registration Statement (or, if applicable, any
post-effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the number of Shares set
forth opposite their respective names in Schedule I bears to the aggregate
number of Underwritten Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as the Representatives
may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 9 by an
amount in excess of one-tenth of such number of Shares without the written
consent of such Underwriter. If on the Closing Date or the Additional Closing
Date, as the case may be, any Underwriter or Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date, and arrangements satisfactory to the Representatives, the Company
and the Selling Stockholders for the purchase of such Shares
23
are not made within 36 hours after such default, this Agreement (or the
obligations of the several Underwriters to purchase the Option Shares, as the
case may be) shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholder. In any
such case either you or the Company and the Selling Stockholders shall have
the right to postpone the Closing Date (or, in the case of the Option Shares,
the Additional Closing Date), but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter
under this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company or the
Selling Stockholders to comply with the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company or the Selling
Stockholders shall be unable to perform its obligations under this Agreement or
any condition of the Underwriters' obligations cannot be fulfilled, the Company
or the respective Selling Stockholder, as the case may be, agrees to reimburse
the Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and expenses of its counsel) reasonably incurred by the Underwriter in
connection with this Agreement or the offering contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon the
Company, the Selling Stockholders, the Underwriters, each affiliate of any
Underwriter which assists such Underwriter in the distribution of the Shares,
any controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Shares from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by X.X. Xxxxxx Securities Inc. alone on behalf of the
Underwriters, and any such action taken by the Representatives jointly or by
X.X. Xxxxxx Securities Inc. alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o X.X. Xxxxxx Securities Inc., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (telefax: (000) 000-0000); Attention: Syndicate Department. Notices
to the Company shall be given to it at 0000 Xxxxx Xxxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000 (telefax: (000) 000-0000); Attention: President. Notice to the
Selling Stockholders shall be given to the Attorneys-in-Fact at 0000 Xxxxx Xxxxx
Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (telefax: (000) 000-0000) Attention:
President.
13. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
24
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAWS PROVISIONS THEREOF.
25
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
VALLEY MEDIA, INC.
By:
------------------------------
Title:
SELLING STOCKHOLDERS:
---------------------------------
Barnet X. Xxxxx
---------------------------------
Xxxxxx X. Xxxx
Accepted:_________, 1999
X.X. Xxxxxx Securities Inc.
BancBoston Xxxxxxxxx Xxxxxxxx
Acting severally on behalf of
themselves and the several Underwriters
listed in Schedule I hereto.
By: X.X. Xxxxxx Securities Inc.
Acting on behalf of itself and the
several Underwriters listed in
Schedule I hereto.
By:
------------------------------------
Name:
Title:
26
SCHEDULE I
Number of Shares
To Be Purchased
Underwriter ----------------
-----------
X.X. Xxxxxx Securities Inc................
BancBoston Xxxxxxxxx Xxxxxxxx.............
Total ---------------
27
SCHEDULE II
Number of
Option Shares
Selling Stockholder -------------
-------------------
Barnet X. Xxxxx........................................ 472,500
Xxxxxx X. Xxxx......................................... 52,500
-------------
Total 525,000
28
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
29
